The Colorado Department of Revenue has determined that an information technology provider’s sale of its backup service, which allowed its customers to back up business applications, files, and systems, and also included the delivery of computer servers to customers’ locations, constituted a nontaxable service.  Although the Department “considered whether the placement of [the] servers constitut[ed] a taxable lease of tangible personal property to [the taxpayer’s] clients,” it concluded that, based on the “totality of the facts and circumstances,” the true object of the backup service was “the sale of nontaxable computer software products and related services,” and not the use of the servers.

Colo. Dep’t of Revenue, Private Letter Ruling No. PLR-20-008 (June 23, 2020).